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The Supernova Report covers the decentralization of communications, software, and media. Why decentralization? Because it’s the hidden theme that links together the transformations sweeping across industry after industry. Decentralization means that intelligence at the edges of networks is replacing hierarchical control from the core.

Several self-reinforcing trends are fueling this shift. Powerful devices in the hands of end-users, from Tivo to WiFi wireless cards, are hollowing out decades-old businesses based on centrally controlled networks. Meanwhile, pervasive connectivity is pulling once-isolated activities into webs of activity. Software in one data center needs to talk to software elsewhere, because the businesspeople using that software are inextricably linked with their colleagues, co-workers, suppliers, outsourcers, and customers.

These forces promote extraordinary innovation. Broadband, Web services, wireless LANs, collaboration software, connected handheld devices, Weblogs, and Internet telephony are all riding the decentralization wave. At the same time, decentralization poses new difficulties. What are the business models to capture value from services that today are largely free, including Weblogs and WiFi hotspots? What happens when phone traffic migrates to unregulated voice over IP connections? Where will the money come from to pay musicians who today work through record labels? When is government regulation essential to ensure free markets, and when does it destroy free markets?